“It ain’t what you don’t know that gets you into trouble.
It’s what you know for sure that just ain't so.”
Progress. Success. Failure.
Much of life can be boiled down to understanding the limits of your knowledge.
Famed investors Warren Buffett and Charlie Munger’s “Circle of Competence” mental model explain this well. The concept is simple. There are two buckets of knowledge: (1) stuff you know and (2) stuff you don’t know. An intelligent investor - Buffett and Munger would say - focuses on operating in domains they’re knowledgeable in (i.e., areas where they have an edge) and, even more importantly, avoids operating in domains they're not knowledgeable in.
But while the advice sounds simple, few are able to follow it.
“The first principle is that you must not fool yourself and you are the easiest person to fool.”
- Richard Feynman (1974)
In the year 2000, financial author Roger Lowenstein published his book, “When Genius Failed: The Rise and Fall of Long-Term Capital Management”. Founded in 1994, the infamous hedge fund included some of the most accomplished financial experts of its time: Members of the Federal Reserve, respected university professors, and even future Nobel Prize winners. Yet despite the density of intellect and the firm’s spectacular early performance, LTCM found itself in uncharted territory when its failure led to a $3.6 billion bail-out in 1998 that nearly brought down the financial system.
Intellect does not equal intelligence. History is filled with stories of “geniuses” fooling themselves.
I’ve been part of the workforce now for almost 3 years, and what I’ve learned in this short time is that the colleagues I’ve most enjoyed working with are those that understand the edges of their knowledge. For example, I’d much rather work with a colleague that has an IQ of 100 and realizes this than work with a colleague that has an IQ of 140 but believes they have an IQ of 160. Project mismanagement. Miscommunication. Lack of strategic clarity. In my experience, it is the unaware and prideful that often break things.
Now, the most basic mistake to make when learning about human biases is to think that they apply to others, but not to yourself. Again quoting Feynman, “You are the easiest person to fool”.
Being aware of my own self-deluding susceptibilities has led me to seek out corrective tools.
[1] Writing is an excellent one. If I can’t clearly articulate, in writing, a concept, idea, or learning, can I really claim knowledge of it? [2] Speaking is another, especially as a self-awareness tool. When most people listen to their own voice for the first time it’s unsettling. The way we hear ourselves when we speak is often very different from the way we actually sound to others. Self-narrating my own writing has helped me better understand my deficiencies as a speaker (which I previously couldn't see). [3] Sharing publicly is another powerful tool. Despite the very real pain that comes with exposing oneself to public critique, there is so much to be gained from testing your ideas against the fire of public thought, particularly when your feedback is coming from thoughtful individuals.
Over time, I’ve become convinced that the three most important words in the English language are, “I don’t know”. Explicit acknowledgement of one’s lack of knowledge is often treated as an admission of defeat in everyday conversation. But if the goal is to understand reality with greater accuracy, “I don’t know” is simply the starting point of progress.
“It ain’t what you don’t know that gets you into trouble.
It’s what you know for sure that just ain't so.”
